9911796707
TMI Blog2020 (4) TMI 819X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of trait value has been made by SBGIL to MMB. When we examine aforesaid facts which have come on record from sub-licencee agreement and tripartite agreement in the light of the arguments addressed by the ld. AR for the assessee that assessee is an approved research company by the Department of Scientific and Industrial Research, Ministry of Science Technology since AY 2004-05. Matter is required to be remitted back to the AO who shall examine afresh if the assessee company has carried out any scientific research and development activities during the year under assessment independent of the technology purchased from MMB in the light of Agreement (supra) between assessee company and MMB an tripartite agreement between assessee company, MMB and SBGIL, keeping in view the observations made herein before by providing an opportunity of being heard to the assessee, hence the appeals filed by the assessee as well as Revenue are allowed for statistical purposes. - ITA No.6112/Del./2014, ITA No.1836/Del./2016 - - - Dated:- 24-2-2020 - Shri R.K. Panda, Accountant Member And Shri Kuldip Singh, Judicial Member For the Assessee : Shri Pradeep Dinodia, CA, Shri V.P. Gupta, Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2012-13. 5. That the CIT(A) also erred in not fully and correctly recording the facts of the case of the appellant as were duly explained before her supported by copies of documents submitted in the Paper Book and also making certain wrong and irrelevant observations in the order passed by her and also referring of the case law not relevant to the case of the Appellant company. 6. That the CIT(A) also erred in holding that amounts of ₹ 4,36,035/- and ₹ 3,11,229/- aggregating to ₹ 7,47,264/- credited to Profit Loss Account were also not in the nature of business income for the purpose of deduction u/s 80IB(8A) of the Act. 3. Appellant, JCIT (OSD), Circle 7(1), New Delhi (hereinafter referred to as the Revenue ) by filing the present appeal sought to set aside the impugned order dated 22.01.2016 passed by the Commissioner of Income-tax (Appeals)-14, New Delhi qua the assessment year 2011-12 on the grounds inter alia that :- 1. Ld. CIT (A) erred in law and on fats of the case in directing the AO to allow deduction u/s 80IB (8A) of the Income tax Act in respect of royalty income on cotton hybrid seeds. 2. Ld. CIT (A) erred in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er before the ld. CIT (A) for both the assessment years i.e. AYs 2010-11 2011-12. For AY 2010-11, ld. CIT (A) confirmed the assessment order passed by the AO whereas in AY 2011-12, ld. CIT (A) allowed the deductions claimed by the assessee company u/s 80IB of the Act. Feeling aggrieved, both the assessee as well as the Revenue have come up before the Tribunal by way of filing the separate appeals. 7. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 8. Undisputedly, for the initial five years from AYs 2004-05 to 2008-09, deduction claimed by the assessee company u/s 80IB(8A) has been allowed by the AO. It is also not in dispute that in AY 2009-10, AO declined the claim of assessee s company for deduction u/s 80IB but allowed by the ld. CIT (A), which order has been accepted by the Department as no further appeal has been filed. It is also not in dispute that by taking divergent view by the AO in the seventh year of claiming deduction u/s 80IB, earlier assessments for AYs 2004-05 to 2009-10 have not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. 80-IB. (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. . (8A) The amount of deduction in the case of any company carrying on scientific research and development shall be hundred per cent of the profits and gains of such business for a period of ten consecutive assessment years, beginning from the initial assessment year, if such company- (i) is registered in India; (ii) has its main object the scientific and industrial research and development; (iii) is for the time being approved by the prescribed authority at any time after the 31st day of March, 2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sy at hand in the light of the sublicencee agreement dated 11.08.2003, it has come on record that the primary object of the sub-licencee agreement between assessee company and MMB, a leading biotech company in USA is that MMB has given the Monsanto Technology to the sublicencee/ assessee company to test, produce and sell Insect Tolerant Cotton Planting Seeds and to further sub-licence the technology granted under this Agreement to the sub-licencee. Agreement (supra) is very extensive in terms and conditions wherein insect tolerance or insect tolerant has been defined as under :- 1.17 Insect Tolerance or Insect Tolerant shall mean reduced damage from boll worms (as well as form certain other insects of the order Lepidoptera which may be identified by Sublicensor) to fruiting parts of cotton plants which have been Genetically Modified by recombinant DNA technology, but not limited to B.t. Gene (s). 12. Furthermore, Article 2 para 2.1 of the Agreement empowers the assessee company to use Monsanto Technology to the following effect :- 2.1 SUBLICENSE TO USE MONSANTO TECHNOLOGY : Sublicensor hereby grants to Sublicensee, and Sublicensee hereby accepts, on and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Department of Biotechnology, Government of India, New Delhi and the other half of one time nonrefundable initial fee shall be payable no later than six (6) month, after the dale of execution of this Agreement. (b) In further consideration for the sublicense rights granted hereunder, Sublicensee shall pay to Sublicensor, as a running fee for the sublicense granted hereunder, an amount calculated for each hybrid of Genetically Modified Hybrid Cotton Planting Seed as follows: first, reduce the Trait Value by the Dealer Commission Percentage; second, multiply that reduced Trait Value by seventy percent (70%): and third multiply that amount by the Net Sales (expressed as the number of Units) by or on behalf of Sublicensee. for which sublicensee has received payment. Repeat the process for each hybrid of Genetically Modified Hybrid Cotton Planting Seed. Add up the amount due for each hybrid of Genetically Modified Hybrid Cotton Planting Seed. In case the Sublicensee does not receive the payment for the Net Sales made by it from April to August for the Genetically Modified Hybrid Cotton Planting Seed, the running fee due in respect to such Net Sales shall be paid to Sublic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under :- 1(A) (B), multiplied by the total number of Units Bold by the Seed Company along with applicable tax / levy (the Parties understand that the applicable tax currently is only value added tax ( VAT ) @4%) as provided under clause. 1 (A) (d). The mode of payment shall be as per the provisions of the Sub License Agreement. (d) Tax / levy, applicable on the payments to be made to MMB under clause 1 (A) lee) shall be invoiced by MMB and paid by the Seed Company along with the payments under clause 1 (A) (c). In the event per Unit VAT and/ or any other tax / levy, applicable on the payments to be made to MMB Under clause 1 (A) (c) exceeds ₹ 8.30 (Rupees Eight and Paise Thirty only) for Bollgard.I Cotton Seeds, the maximum retail price per Unit as applicable under c1ause 1 (A) (a) or 1 (A) (b) shall be adjusted upwards (considering 17% trade discount applicable on such additional tax / levy) to the extent of increase in the amount of additional taxes/levies, for the purpose of determining MMB s share of Trait Value. (e) In case no VAT and/or any other taxi levy is applicable or imposed on the payments made to MMB under this Supplementary Agreement in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Monsanto Technology and in all promotional and advertising material related thereto in the manner specified in the trademark sub-licence agreement. 22. Furthermore, when we go through clause 2.5 (d) of the sublicence agreement that sub-licencee shall not market or otherwise commercialize or commercially use ( for example as a parent line for production of Genetically Modified Hybrid Cotton Planting Seed) any Genetically Modified Hybrid Cotton Planting Seed without approval of sub-licensor as provided below, which is extracted as under :- Sublicensee shall not market or otherwise commercialize or commercially use (for example as a parent line for production of Genetically Modified Hybrid Cotton Planting Seed) any Genetically Modified Hybrid Cotton Planting Seed without approval of Sublicensor as provided below. Prior to any sale or other commercial distribution of any new hybrid of Genetically Modified Hybrid Cotton Planting Seed, each such hybrid shall be tested for gene equivalency as set forth in Exhibit A and for agronomic criteria as set forth in Exhibit B (together, the Quality Tests ) for two (2) seasons (without an intervening failure to pass the Quality Tests ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, namely, Shriram Bioseed Genetics India Ltd. (SBGIL) directly to the MMB as per Tripartite Agreement entered into between assessee company, MMB and SBGIL. However, as per sub-licencee agreement between assessee and the MMB, it is the liability of the assessee company to pay the trait value to the MMB. 27. Clause 4 5 of the Tripartite Agreement is extracted for ready perusal as under :- 4. In case SBGI fails to pay the trait value fee or other cost including but not limited to penal interest for delayed payment payable by SBGI to MMB then under such circumstances BRI undertakes to pay due amount to MMB promptly. MMB reserves the right to take such other legal action as may be deemed necessary against SBGI and BRI to recover the amount due. 5. SBGI shall comply with all the tax provisions with relation to the trait value fee payment to MMB. SBGI and BRI agree to indemnify MMB in case there are any claims raised by Tax authorities on MMB as a result of this Agreement. 28. When we refer to clauses 4 5 of the Tripartite Agreement, it is clear that the payment of trait value by SBGIL to MMB is only on behalf of assessee company which is required to be accounte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company, it is difficult to understand what research part has been played by the assessee company in developing the Hybrid B.t. Cotton Seeds which are supplied to SBGIL for marketing; vi. that the assessee company has not brought on record the complete facts as to why the trait value payment has not been routed through its books of account particularly when SBGIL claimed to have marketed Hybrid B.t. Cotton Seeds developed by the assessee company but made the payment of trait value to MMB. It is also difficult to understand that when assessee company has claimed to have developed the Hybrid Cotton Seeds through its research and development activities then what was the purpose of entering into sub-licencee agreement with MMB to avail of their technology to develop the Hybrid Cotton Seeds; vii. that from the entire arrangement brought on record by the assessee company as to availing of the Monsanto Technology from MMB, making the payment of trait value by the SBGIL to whom Hybrid Cotton Seeds were supplied for marketing by the assessee as per tripartite agreement and that no patent or copyright has ever been developed by the assessee company during the last 5 6 years, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at apart from the Monsanto Technology availed of by the assessee company, it has independently carried out research and development activities as required u/s 80IB (8A); xiv. that not an iota of evidence has been collected by AO/CIT(A) as to what value addition has been made by assessee company in the technology received from MMB on payment of trait value by conducting its own research. Because when assessee company has paid trait value for vital technology received from MMB, then what additions they have made; xv. that in A.Y 2011-12 AO/CIT have also decided the issue against assessee company without conducting any investigation if the research and development activities are actually being carried out by assessee company independent MMB technology. xvi. that when assessee company claimed to have developed Hybrid B.t. Cotton Seeds itself and supplied the same to SBGIL then why SBGIL has been made to pay trait value to MMB. xvii. that AO is to categorically find out the role of the assessee company as well as Monsanto Technology independently in order to develop the Hybrid B.t. Cotton Seeds; 29. In view of what has been discussed above, we are of the considere ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
